BY MARCI JACOBS AND ASHLEY DEVICK
In the corporate version of a time warp, one of America’s oldest food companies held its first annual shareholder meeting Tuesday.
Kraft Foods, the parent of brands such as Cadbury, Oreo and Velveeta split into two companies in October, creating Kraft Foods Group Inc. and Mondelez International Inc. The new Kraft is focusing on developing traditional brands in North America, while Mondelez Inc. is focusing on snacks and candy in emerging and international markets.
And Tuesday, Kraft, the darling of the American food business, held its first annual meeting at the Hyatt Regency O’Hare in Rosemont. The message was clear–despite the divorce and some revamped marketing efforts, it’s doing just fine.
“We’re taking a company with a storied 110-year-old legacy and we’re creating something special – a remade Kraft – one with the spirit of a start-up and the soul of a powerhouse,” CEO Tony Vernon told shareholders.
And shareholders wanted the scoop. Roughly 150 attended the meeting, which provided a rare opportunity for them to interact with top-level executives.
Vernon and Executive Chairman John Cahill reveled in reporting Kraft’s fledgling success as an independent company. On May 2, Kraft posted solid first-quarter results with revenue up 2.1 percent to $4.5 billion. And the company will be paying shareholders a 50-cent quarterly dividend.
“Our first quarter results reflect strong returns on our new product innovations to date, as well as the fact that our cost savings outpaced our plans to reinvest in our brands,” Vernon said earlier this month.
Shareholders also are feeling flush.
“I received Kraft many years ago from Philip Morris. And it was stock that was dead. And many times I wanted to sell it,” shareholder Lilia Juarez said during the question and answer period, receiving chuckles. “And all of a sudden it’s soaring, just completely soaring!”
Vernon agreed with Juarez that Kraft’s shares have performed well, but, he said winking, “Buy more, responsibly.”
Shareholders voted in favor of the meeting’s crop of advisory items, approving the proposed executive compensation and the election of three new directors.
Still, 95 percent of shareholders voted against a proposal requiring Kraft to list any genetically engineered ingredients in Kraft products, a policy proposed by the Adrian Dominican Sisters.
Sister Gwen Farry represented the proposal.
“We as shareholders believe that the right to know is a fundamental principle of democratic societies and market economics,” Farry said. “As shareholders concerned about the sustainability of our company, we contend that regardless of what an individual believes about the safety of genetically engineered foods, the movement to label genetically modified foods is built on the inarguable truth that all people have the right to know what is in their food.”
Following the meeting, attendee Florence Finkler said that while she understands Farry’s concerns, she doesn’t think people read labels anyway. “They’re beginning to read labels more. They read the nutrition but not if they’ll get down there to that bottom line.”
Vernon and Cahill maintained a tense composure as the floor opened to questions and shareholders voiced a slew of concerns around employee and animal rights.
Ross Hyman, a researcher and community organizer with the American Federation of Labor and Congress of Industrial Organizations, pressed Cahill on the issue of Kraft’s executive compensation package, which allows officers who quit to receive two to three years worth of salary. The AFL-CIO is one of the largest federation of unions in the U.S.
“Often these people’s salaries are already quite outrageous, 300 times that of a typical employee in many cases,” he said. “That’s bad for our members. It’s bad for equality in our society. It’s bad for the share price of the stock. Our members have pension funds and shares in Kraft and they rely on that for their retirement.”
And a lurid discussion of livestock treatment drew grimaces. David Byer, a senior corporate liaison for People for the Ethical Treatment of Animals, questioned when Kraft plans to take steps to end cattle dehorning practices among its dairy suppliers.
“Consumers are shocked when they see the behind-the-scenes footage of dehorning,” he said, describing the process by which horns are gouged from cattle’s skulls and the wounds are then cauterized.
“Currently most cows in Kraft’s supply chain are bred with horns and are then dehorned to keep them from growing. One of the most common forms of dehorning is to burn through horn wells on the heads of young calves with searing hot irons,” he said.
Vernon assured shareholders that the company strongly discourages dehorning and upholds some of the most stringent safety standards in the industry.
“Kraft has long believed that quality dairy products begin with quality animal care and healthy cows,” Vernon said. “We want all animals to be healthy and safe.”
Practical, product-related questions from the floor changed the tenor of the discussion.
An avid coupon clipper and someone who eats “an awful lot of the products,” shareholder Frances Finkler asked how Kraft selects products for discounts. Cahill explained there’s a sophisticated process behind coupon placement and encouraged her look for additional coupons online.
Shareholder Terry Brady said he believes Kraft’s product lines are a winning long-term investment.
“They make the sort of things that you know about,” he said. “Of their snack foods, most of the things Kraft makes are things that I know and that end up in our house.”
And so concluded the first annual shareholder meeting of a company whose reputation most certainly precedes it.
“It’s our first shareholder meeting,” Kraft spokesman Basil Maglaris said. “We’re a new company and we wanted to put a new mark on this day.”